The Ultimate Guide to Investing in Hotels in Cambodia
One of the best markets you can invest in real estate is Cambodia since it has one of the most stable markets. This is due to the fact that the country’s economy isn’t as reliant to foreign countries. Meaning, investing in a variety of properties can only prove to be worthwhile. Among the properties you can invest in are hotels, which you will benefit from considering Cambodia is a hub for tourism.
If you want to invest in a hotel in Cambodia, whether as a local or foreign investor, continue reading to learn everything you need to know.
Hotel market in Cambodia
Despite the pandemic that has slowed down industries, the demand for hotels and the hospitality sector continues to strengthen every year. In fact, the predicted contribution of tourism to the country’s GDP is at a 6.9% annual growth rate until 2024. Not only that, but the number of tourists arriving in the country increases every year with the highest in 2019 at 4.8 million people according to the records of the National Bank of Cambodia.
With the increasing number of tourists yearly, demand for accommodation has also skyrocketed. An estimated 28 million tourists are expected to visit the country by 2030 and demand for accommodation for the same year is expected to be at 15 million. This means, investing in hotels and rental properties is a great idea, especially with the projected growth of demand.
Currently, most hotels are situated in Phnom Penh, Siem Reap, and Sihanoukville. These are the major cities in Cambodia who are at the top when it comes to competing with tourists.
Investing in a Hotel
If you want to invest in a hotel, whether you’re a local or foreign investor, the process you have to go through remains the same wherein you need to get a hotel license and register the business for tax purposes.
However, a foreign investor might take a relatively longer route in investing since according to the law, only locals can own properties or land. This means, foreign investors need to either set up their own company in the country to invest in a hotel or work with an already established local company.
Using a Cambodian Company
The best choice for foreign investors is to create a private limited company or a limited liability company with Cambodians. During this, the investor can classify as an individual that’s a part of the company or as a legal entity.
When this is set up, the foreign investor can then buy a building with a strata title, using the company—which under the law, is one of the ways for foreign investors to enter the real estate market in Cambodia.
To ensure that the foreign investor is secure in their investment, three things are added while the company is being set up:
- Set up a local & foreign company share
Foreign investors can create a company with two different kinds of shares for local and foreign shareholders. In this, you can arrange for the local shareholders to have weak voting power in terms of transferring shares or nominating directors. This will help in protecting the foreign investors’ shares since they can only have 49% of the shares in any company with land. Moreover, stipulating to the shareholders that any major decisions require two-thirds of the majority to vote for it, can help negate undue decisions.
- Set up a Minority Control Document
Besides the different company shares, foreign investors can create a minority control document wherein Cambodian shareholders agree to give them additional rights. These rights can include blank shareholder transfer forms, different powers of attorney or even a permanent majority on the board.
- Secure the land
To further cement the shares of the foreign investor, they can also secure the land by registering a mortgage on the property. This will ensure that the land cannot be transferred to another person or organization with the approval of the foreign investor.
Preliminary Approval & Hotel License Application
Once the company has been set up by the foreign investor, then they can start applying for preliminary approvals required by the Ministry of Tourism in Cambodia. You would need to apply for the following:
- A letter of security
- A certification for fire control and safety
- A sanitation certificate
- Approval for construction/repair
- Approval for company location
Take note that approval for company location needs to go through the Sangkat, Khan, and local Commerce department first which can take awhile. Additionally, all your documents for lease and corporate should be submitted to these authorities.
Once you’ve gotten all preliminary approvals, you can then file a hotel license application to the Ministry of Tourism.
As soon as the Ministry of Commerce has approved the principle approval of registration along with the business registration certification, you need to register your business for tax purposes. The specific tax authority you need to register in should be in the same location where your hotel is located.
Take note though that the VAT and patent certificate for your hotel can only be given as soon as you submit the business registration approval and license.